The interest in financing education is growing today. More and more students and their parents try to find best funding sources for college expenses and face various obstacles. One of the main obstacles is an income-level and the ability to have a credit-worthy cosigner. And people want to know: “Is it possible to qualify for a loan without cosigner?”.
The short answer is: “Yes, it is”. However it’s necessary to know all details and basics of college funding. There are two main types of student loans including: Federal loans and Private (also called non-federal or alternative loans). A borrower can qualify for Federal loans without cosigner. It’s true.
The main reason for is that Federal Direct loans are need-based loans. In this case a borrower’s credit history and ability to find a good cosigner doesn’t matter. However not all of student loans under Federal Loan Program are need-based. Some of them can deal with creditworthiness (PLUS loans for graduates and parents) and potential borrowers will pass or not credit check. In this case a credit-worthy cosigner could be a turning point.
Federal loans are available without cosigner and even with bad credit history (except PLUS loans). In fact, two of three federal loans (Perkins and Subsidized Stafford) are focused on students with financial need. They don’t care about cosigning loans but they want to help needy student financially. It’s important to make an analysis of a borrower’s financial situation and learn more about federal loans requirements.
The second category of loans – are private student loans meaning that loans are made by private banks (e.g. Citibank) or other financial companies in the market. All private loans are credit-based (dealing with borrower’s creditworthiness). There are two main requirements: high income level (to be able to repay a loan) and good credit history (to ensure bank in creditworthiness and give guarantees by showing successful credit records). A lender wants to be sure that a borrower is “real deal” and wants to receive money back with interest.
If someone does not have high-income and or has bad credit score – a cosigner can save the situation. In fact, most banks say that being able to apply for a loan with good cosigner increases chances to qualify for a loan and even lower the interest. So, if a borrower does not have these two requirements – it’s necessary to have a credit-worthy cosigner. It’s important to know that not all cosigner could be good. By “credit-worthy” cosigner banks mean that a cosigner has high income and good credit history. In other words, if a borrower does not meet requirements – a cosigner must. However if a borrower’s cosigner does not have high income and good credit score a borrower will not qualify.